They don't need to transfer anything anywhere.
Once you invite them to use the shared storage, their data will seamlessly start using the new shared storage. If they have the free 5GB option it will automatically move them to the shared storage once they accept the invitation.
For those using paid storage of their own, do not have them cancel their current storage as that will delete anything that exceeds 5GB from their account.
They simply need to accept the invitation and if they are paying for storage themselves choose to use the shared storage instead. At that point their own subscription will be cancelled. Do not manually downgrade.
See here: link-> Share iCloud+ with your family - Apple Support